Federal budget update 2014/15
General advice
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ASX Participant. AFSL No 240837. Part of the IOOF group. This is general
advice only and has been prepared without taking into account your particular
objectives, financial situation and needs. Before making an investment decision
based on this article, you should assess your own circumstances or consult a
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and seek taxation advice from a registered tax agent before making any
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“Contribute and build”
• Toughest Budget since 1997
• Economic repair job to protect Australia’s living standard
• Prepare for ageing population
Did you know... in 1950 there were 17 taxpayers for
every retiree, but by 2050 it is predicted that there
will only be 2.7 workers per retiree.
Source: Intergenerational report 2010.
Forecast: Budget deficit reduction
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How will the Budget affect you?
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Superannuation
Taxation
Centrelink and other Government benefits/ payment
Health and education
Questions
Superannuation
6
Super guarantee (SG) increases
Financial year
commencing
1 July 2013
1 July 2014
1 July 2015
1 July 2016
1 July 2017
1 July 2018
1 July 2019
1 July 2020
1 July 2021
1 July 2022
7
New proposed SG
rate (%)
9.25
9.5
9.5
9.5
9.5
10
10.5
11
11.5
12
Current legislated SG
rate (%)
9.25
9.5
10
10.5
11
11.5
12
12
12
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Non-concessional contributions
• Have you made after tax super contributions that exceed the
limit?
Non-concessional contribution caps
Current
$150,000 per annum or
$450,000 over three years (if 64 or under)
2014/15
$180,000 per annum or
$540,000 over three years (if 64 or under)
• You can withdraw the excess amount from your fund
• Tax payable on investment earnings at your marginal rate
rather than penalty tax (top Marginal tax rate)
• Applies to contributions made since 1 July 2013
8
Concessional contributions
• Similar refund mechanism applies to concessional
contributions
• Excess concessional contributions are taxed at marginal tax
rates
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Taxation
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Budget repair levy
Do you earn more than $180,000 pa?
• For taxable income earned above $180,000, an
additional 2 per cent levy applies.
• Applies from 1 July 2014 to 30 June 2017.
• Brings the top marginal tax rate to 49 per cent
(including increases to Medicare levy of two per cent)
• What could you consider?
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Budget repair levy (Cont)
Income
bracket
Current tax
rates
New tax
rates
Medicare SG tax
levy
(%)
(%)
Old tax
saving
(%)
New tax
saving
(%)
$0 - $18,200
0%
0%
0
0
0
0
$18,201 - $37,000
19%
19%
2
0
Variable
Variable
$37,001 - $80,000
$3,572 + 32.5%
$3,572 + 32.5%
2
15
19.0
19.5
$80,001 - $150,000
$17,547 + 37%
$17,547 + 37%
2
15
23.5
24.0
$150,001 - $180,000* $43,447 + 37%
$43,447 + 37%
2
15
23.5
24.0
$180,001 - $274,599
$54,547 + 45%
$54,547 + 47%
2
15
31.5
34.0
$274,600* - $300,000 $97,117 + 45%
$99,009 + 47%
2
15-30
Variable
Variable
$300,000 +
$11,0947 + 47%
2
30
16.5
19.0
$108,547 + 45%
* Includes SG of 9.25 per cent. Does not take into consideration the
maximum contribution base for SG calculation.
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Fringe benefits tax (FBT) rate
• The FBT rate will increase from 47 per cent to 49 per cent
from 1 April 2015 until 31 March 2017
• Targets people earning over $180,000
• Cannot use salary packaging to avoid the budget repair
levy
• If you are currently packaging a car this may impact you
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Medicare levy thresholds
• The Medicare levy low-income threshold will be
increased from the 2013/14 income year
• No Medicare levy if taxable income is equal to or less
than:
Threshold
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Individuals
$20,542
Pensioners eligible for SAPTO
$32,279
Couple (combined)
$34,367
Additional for each dependent
child/student
$3,156
Tax offsets abolished
Applies from 1 July 2014:
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Mature age workers tax offset
Dependent spouse tax offset
Previously available if you were
born before 1 July 1957 and
receiving income from working
Previously available for
dependent spouses born
before 1 July 1952
Fuel excise
• Twice annual indexation of fuel excise based on CPI from
1 August 2014.
• Likely will see fuel prices go up for consumers.
• Government to invest the funds in roads and traffic
conditions around the country.
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title of presentation
Centrelink and other
government benefits/ payments
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Increase to the age pension qualifying
age to 70
Current legislation:
Proposed legislation:
The Age Pension qualifying age Continues the current rate
will increase by six months every increase from 1 July 2025 until it
two years starting 1 July 2017
reaches 70 years by 1 July 2035
until it reaches age 67 on 1 July
2023
No changes to superannuation preservation age at this stage – usually
5 years below age pension age.
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Age pension example
• If you are born after 1 January 1966 you won’t be able to
apply for the age pension until age 70
Example: Kate was born on 1 January 1970 and is currently 44.
Under current age pension legislation she was expecting to access
the age pension at age 67. If the proposed changes come into effect,
she will have to wait until age 70
• What will happen if Kate wants to retire at age 60?
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Summary: proposed age pension
qualifying age
Date of birth between
Current
Proposed
20
1 July 1952 and 31 December 1953
Age eligible for
age pension
65½
1 January 1954 and 30 June 1955
66
1 July 1955 and 31 December 1956
66½
1 January 1957 and 30 June 1958
67
1 July 1958 and 31 December 1959
67½
1 January 1960 and 30 June 1961
68
1 July 1961 and 31 December 1962
68½
1 January 1963 and 30 June 1964
69
1 July 1964 and 31 December 1965
69½
1 January 1966 and later
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Deeming rate thresholds
• From September 2017, the Government propose to
change the deeming rate thresholds:
Current threshold
New threshold
Deeming rate for
couples
$77,400
$50,000
Deeming rate for
singles
$46,600
$30,000
• The government has not commented on including the
family home in the means test (as initially speculated).
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Indexing Pension and other
payments by CPI
The indexation of pension and other equivalent payments is
proposed to be linked to the consumer price index (CPI).
This will apply from:
• 1 July 2014 to Parenting Payment Single recipients.
• 1 September 2017 to Bereavement Allowance and
pension payments such as age pension, disability support
pension, carer payment and veterans’
affairs pensions.
• What impact will this have?
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Disability Support Pension (DSP)
• If you are a DSP recipient, the amount of time you can
leave Australia and still receive the DSP may be reduced
• Maximum of four weeks in a 12 month period
• Apply from 1 January 2015, to existing and new
applicants
• Under age 35 on DSP? Possible review of eligibility
based on ability to work 8 hours per week
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Commonwealth Seniors Health Card
• From 1 July 2014, income levels for the Commonwealth
Seniors Health Card (CSHC) will be indexed by CPI
• Currently, you may apply for the CSHC as follows:
Current adjusted taxable income
per annum:
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Single
$50,000
Couple
$80,000
Commonwealth Seniors Health Card
(cont)
• Account-based pension to be subjected to ‘deeming’ for
assessment for new applicants from 1 January 2015
(previously not included).
• From September 2014, Holders of CSHC will not be
entitled to seniors supplement:
Current seniors
supplement (pa)
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Single
$876
Couple
$660
Family payments
• Family Tax Benefit Part B (FTB Part B) primary earner
income limit reduces from $150,000 to $100,000 per
annum
• Limited to families whose youngest child is under six
• Families with a youngest child aged six and over on 30
June 2015 will remain eligible for FTB Part B for two
years
• Pause on current FTB amount for part A and B for two
years
• New FTB allowance - $750 for each child aged 6-12
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Newstart allowance
• Increase the age of eligibility for Newstart Allowance from
22 to 24 years of age
• If under 30, must demonstrate appropriate job search for
six months and then participate in 25 hours per week
Work for the Dole
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title of presentation
Health and education
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Pharmaceutical benefits scheme
In 2015, prescription costs will increase for pharmaceuticals
on the PBS for:
• general patients by $5.00
• concessional patients by $0.80
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Patient contribution fee
• $7 “patient contribution” fee each time you visit your GP
• Concession card patients and children under 16 only pay
for first 10 visits each year
• Applies from July 1 2015
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title of presentation
University students – HECS/HELP
• From 1 June 2016, the HELP (formally HECS) interest
rate will be on the 10 year bond rate (rather than CPI)
• Capped at six per cent
• Repayments start once earning over approx $50,638 per
annum
• New repayment rate of 2 per cent applies to incomes over
$50,638 per annum
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Questions